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No Surprises Here: PE takes center stage in the No Surprises IDR process

No Surprises Here

Private equity-backed companies are among the top initiating parties in the No Surprises Act Independent Dispute Resolution process

 

In December 2022, the Centers for Medicare and Medicaid Services published a report containing initial data (covering April 15 to September 30, 2022) from the No Surprises Act’s Independent Dispute Resolution process. This process is supposed to determine out-of-network payment amounts when providers/facilities and health plans cannot reach agreement.[1]

But first, what is the No Surprises Act? It is federal legislation that went into effect on January 1, 2022 to address the problem of surprise medical bills. Surprise medical billing is when a patient is hit with an unexpected bill after receiving healthcare services at a supposedly in-network provider. This happens because many hospitals and providers contract with third party physician groups to provide services (such as emergency room staffing) which negotiate their own billing rates with insurers. Historically, some of these groups remained out-of-network, either in the short term or long term, in order to charge higher rates,[3] although this practice has decreased following increased scrutiny and regulation.[4] The No Surprises Act is an effort to curb the practice even further in order to protect patients from outsized and unexpected bills when they seek emergency (and even scheduled) care.

The report on the independent dispute resolution (IDR) process, produced by the Department of Health and Human Services, the Department of Labor, and the Department of the Treasury and published online by the Centers for Medicare and Medicaid Services, is intended to bring transparency around implementation of the IDR process within the No Surprises Act.[5]

The IDR report shows a total of 86,807 disputes involving out-of-network emergency and non-emergency items or services initiated during the period April 15-September 30, 2022.[6] The top 10 initiating parties (or their representatives) accounted for 75% of all disputes of this type.[7] Of the top ten parties, four private equity-backed companies make the list, accounting for 41% (36,593) of all disputes.

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CompanyPrivate Equity Firm# of Disputes% of DisputesPlace on CMS List
SCP HealthOnex28,19632%1
TeamHealthBlackstone3,5694%5
Envision HealthcareKKR2,7983%6
Gryphon HealthcareDos Rios Partners2,0302%9
Totals:36,59341%

Source: Centers for Medicare and Medicaid Services.[8]

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Prior to the No Surprises Act, private equity-backed physician staffing companies TeamHealth (owned by Blackstone) and Envision Healthcare (owned by KKR) were at the center of the controversy around surprise billing. They even funded a dark money campaign aimed at legislative attempts to regulate the practice.[9] While private equity-backed companies ultimately failed at preventing legislation, some have argued that that the final law has concessions for providers.[10]

See our December 2022 report, “Envision Healthcare: A Private Equity Case Study” for more information on Envision Healthcare and its starring role in America’s surprise medical billing problem.

Now it appears that both TeamHealth and Envision Healthcare are using the full extent of the law to attempt to extract high payments from health plans. Both companies made it to the top ten list of initiating parties for disputes involving out-of-network emergency and non-emergency items or services (#5 and #6, respectively). Together the two companies accounted for 7% of all disputes for these types of services.

Another private equity-backed company, SCP Health, topped the list, accounting for 32% of all disputes. Unlike TeamHealth and Envision, SCP Health (owned by Onex[11]) is a revenue cycle management company, described in the report as representing “thousands of clinicians across multiple states and accounts.”[12] SCP is in the business of maximizing revenue for clinicians and medical practices,[13] and so it is no surprise it made the top ten.

The fourth private equity-backed company on the top ten list is Gryphon Healthcare (backed by Dos Rios Partners)[14], another revenue cycle management company based in Texas,[15] accounting for 2% of all emergency and non-emergency disputes.

Air ambulances are another major driver of surprise medical bills. The CMS report has a section devoted to air ambulance disputes, specifically, and shows that two private equity-backed companies made the top 10 initiating parties (or their representatives) for air ambulance disputes from April 15 – September 30, 2022.

____________

CompanyPrivate Equity Firm# of Disputes% of all DisputesPlace on CMS List
Global Medical ResponseKKR1,27939%1
Air MethodsAmerican Securities58318%2
Totals:1,86257%

Source: Centers for Medicare and Medicaid Services.[16]

____________

Global Medical Response, which is owned by Kohlberg Kravis Roberts, & Co (KKR)[17] accounted for 39% of all air ambulance disputes cited in the report. Air Methods, owned by American Securities,[18] accounted for 18%. Together, these two private equity-backed air ambulance companies accounted for 57% of all air ambulance payment disputes.

A Brookings report found that compared to other types of air ambulance providers, private equity-owned air ambulance companies, in particular, are less likely to be in-network, with 89% of their transports from 2014-2017 being out-of-network.

The No Surprises Act does not seem to be deterring either company from trying to win higher payments for their services.

Between air ambulance and out-of-network emergency and non-emergency care disputes, only 4% of disputes have resulted in payment.[22] The IDR report shows that the federal agency expenditures to carry out the IDR process for Quarters 2 and 3 amounted to $8,332,293. The federal government collected a mere $0 in administrative fees in Q2 and $88,750 in Q3.

In essence, the federal government is spending millions of dollars to support a process that healthcare providers/facilities and air ambulances can pay a disproportionately small fee to use in the hopes of continuing to extract high out-of-network payments from patients and health plans. Even if this process does not result in the hoped-for payment, taxpayers are picking up the tab for companies and organizations to squabble with each other over bills.

When reviewing the report, the fact that private equity-backed companies top the lists for initiating parties for regular disputes and air ambulance disputes should not come as a surprise. If a private equity firm’s goal is to make outsized profits over the short term, it makes sense to use every tool at one’s disposal in these types of billing disputes.

An editorial published in STAT in August 2022 argued that the No Surprises Act was “a band-aid protecting business as usual.”[25] The data within the CMS report appears to support this position, demonstrating that some of the main culprits in America’s surprise billing problem are still trying their darndest to extract higher out-of-network payments amidst new regulations.

 


[1] “Overview of Rules & Fact Sheets | CMS.” Accessed January 9, 2023. https://www.cms.gov/nosurprises/policies-and-resources/overview-of-rules-fact-sheets.

[2] CMS.gov. “No Surprises: Understand Your Rights against Surprise Medical Bills | CMS,” January 3, 2022. https://www.cms.gov/newsroom/fact-sheets/no-surprises-understand-your-rights-against-surprise-medical-bills.

[3] Pg. 10; Pg. 22; Cooper, Zack, Fiona Scott Morton, and Nathan Shekita. “Surprise! Out-of-Network Billing for Emergency Care in the United States.” Cambridge, MA: National Bureau of Economic Research, July 2017. https://doi.org/10.3386/w23623.

[4] Creswell, Julie, Reed Abelson, and Margot Sanger-Katz. “The Company Behind Many Surprise Emergency Room Bills.” The New York Times, July 24, 2017, sec. The Upshot. https://www.nytimes.com/2017/07/24/upshot/the-company-behind-many-surprise-emergency-room-bills.html; Butt, Rachel, and Paula Seligson. “Envision Healthcare Losses Deepen on Wage Pressures, Contract Fight.” Bloomberg.Com, August 23, 2022. https://www.bloomberg.com/news/articles/2022-08-23/envision-adds-to-losses-amid-wage-pressures-contract-fight.

[5] Pg. 3 of Centers for Medicare and Medicaid Services, Department of Labor, Department of the Treasury, and Department of Health & Human Services. “Initial Report on the Independent Dispute Resolution (IDR) Process: April 15-September 30, 2022,” December 27, 2022.

[6] Pg. 16 of Centers for Medicare and Medicaid Services, Department of Labor, Department of the Treasury, and Department of Health & Human Services. “Initial Report on the Independent Dispute Resolution (IDR) Process: April 15-September 30, 2022,” December 27, 2022.

[7] Pg. 8 of Centers for Medicare and Medicaid Services, Department of Labor, Department of the Treasury, and Department of Health & Human Services. “Initial Report on the Independent Dispute Resolution (IDR) Process: April 15-September 30, 2022,” December 27, 2022.

[7]

[8] Adapted from the Table 4 on pg. 16 of Centers for Medicare and Medicaid Services, Department of Labor, Department of the Treasury, and Department of Health & Human Services. “Initial Report on the Independent Dispute Resolution (IDR) Process: April 15-September 30, 2022,” December 27, 2022. https://www.cms.gov/files/document/initial-report-idr-april-15-september-30-2022.pdf.

[9] Roubein, Rachel. “Health Groups Backed Dark Money Campaign to Sink ‘surprise’ Billing Fix.” POLITICO, September 13, 2019. https://www.politico.com/story/2019/09/13/health-groups-dark-money-hospital-bills-legislation-1495697; Appelbaum, Eileen, and Rosemary Batt. “Private Equity and Surprise Medical Billing.” Institute for New Economic Thinking, September 4, 2019. https://www.ineteconomics.org/perspectives/blog/private-equity-and-surprise-medical-billing; Sanger-Katz, Margot, Julie Creswell, and Reed Abelson. “Mystery Solved: Private-Equity-Backed Firms Are Behind Ad Blitz on ‘Surprise Billing.’” The New York Times, September 13, 2019, sec. The Upshot. https://www.nytimes.com/2019/09/13/upshot/surprise-billing-laws-ad-spending-doctor-patient-unity.html; Arnsdorf, Isaac. “Medical Staffing Companies Cut Doctors’ Pay While Spending Millions on Political Ads.” ProPublica, April 20, 2020. https://www.propublica.org/article/medical-staffing-companies-cut-doctors-pay-while-spending-millions-on-political-ads.

[10] Luthi, Susannah. “Providers Notch Wins in House Surprise Billing Legislation.” Modern Healthcare, July 17, 2019, sec. Politics & Policy. https://www.modernhealthcare.com/politics-policy/surprise-billing-ban-amended-help-hospitals-doctors; Rodwin, Marc, and Alan Sager. “The No Surprises Act: A Band-Aid Protecting Business as Usual.” STAT (blog), August 31, 2022. https://www.statnews.com/2022/08/31/the-no-surprises-act-a-band-aid-protecting-business-as-usual/.

[11] “SCP Health | PortInv-Healthcare | Onex.” Accessed January 9, 2023. https://www.onex.com/portinv-healthcare/schumacher-clinical-partners.

[12] Pg. 16 of Centers for Medicare and Medicaid Services, Department of Labor, Department of the Treasury, and Department of Health & Human Services. “Initial Report on the Independent Dispute Resolution (IDR) Process: April 15-September 30, 2022,” December 27, 2022. https://www.cms.gov/files/document/initial-report-idr-april-15-september-30-2022.pdf.

[13] SCP Health. “Documentation and Revenue Cycle Management.” Accessed January 10, 2023. https://www.scp-health.com/healthcare-solutions/documentation-and-revenue-cycle-management/.

[14] “Dos Rios Partners Gryphon Healthcare.” Accessed January 10, 2023. http://dosriospartners.com/index.php/client/gryphon-healthcare/.

[15] “Gryphon Healthcare | Revenue Cycle and Management Services,” July 20, 2021. https://www.gryphonhc.com/.

[16] Adapted from the Table 11 on pg. 26 of Centers for Medicare and Medicaid Services, Department of Labor, Department of the Treasury, and Department of Health & Human Services. “Initial Report on the Independent Dispute Resolution (IDR) Process: April 15-September 30, 2022,” December 27, 2022. https://www.cms.gov/files/document/initial-report-idr-april-15-september-30-2022.pdf.

[17] KKR. “KKR Portfolio,” June 19, 2014. https://www.kkr.com/businesses/private-equity/kkr-portfolio.

[18] American Securities. “Companies.” Accessed January 10, 2023. https://www.american-securities.com/en/companies.

[19] Adler, Loren, Conrad Milhaupt, Bich Ly, and Erin Trish. “Private Equity-Owned Air Ambulances Receive Higher Payments, Generate Larger and More Frequent Surprise Bills.” Brookings, USC-Brookings Schaeffer Initiative for Health Policy, November 16, 2021. https://www.brookings.edu/essay/private-equity-owned-air-ambulances-receive-higher-payments/.

[20] Adler, et al.

[21] Adler, et al.

[22] Bannow, Tara. “Providers Seeking Resolution of Billing Disputes under the No Surprises Act Cause a Major Backlog of Cases.” STAT, December 30, 2022. https://www.statnews.com/2022/12/30/backlog-builds-under-no-surprises-act/.

[23] Pgs. 30-31 of Centers for Medicare and Medicaid Services, Department of Labor, Department of the Treasury, and Department of Health & Human Services. “Initial Report on the Independent Dispute Resolution (IDR) Process: April 15-September 30, 2022,” December 27, 2022.

[24] Note that these dollar amounts do not reflect the full cost of dispute resolution, as some disputes must use a state, rather, than federal, process.  See “Providers seeking resolution of billing disputes under the No Surprises Act cause a major backlog of cases” for more information.

[25] Rodwin, Marc, and Alan Sager. “The No Surprises Act: A Band-Aid Protecting Business as Usual.” STAT (blog), August 31, 2022. https://www.statnews.com/2022/08/31/the-no-surprises-act-a-band-aid-protecting-business-as-usual/.

 

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